3 Reasons Trader Joe's Is Destroying Whole Foods

The company
famously sells more than two times per square foot than the
average grocery chain.

For years, Whole Foods Market was the dominant name in organic
groceries.

But the company has recently faced
declining sales as more companies offer organic food.

Consumer perception of Trader Joe's is significantly higher than
Whole Foods Market, according to a recent
YouGov BrandIndex study.

Here are a few reasons Trader Joe's is thriving, while Whole
Foods is struggling.

Trader Joe's is cheap. A bag of quinoa is $9.99
at Whole Foods, but $4.99 at Trader Joe's. Meanwhile, gluten-free
cheese pizza is $7.49 at Whole Foods vs. $4.99 at Trader Joe's,
according
to dcist.com. Consumers view Trader Joe's as high-quality,
but inexpensive.

Meanwhile, Whole Foods is seen as being too expensive. The grocer
even earned the nickname "Whole Paycheck." Whole Foods responded
by lowering some prices; however, a recent JPMorgan analyst note
says that the company isn't doing enough to market bargains. This
means that customers likely don't realize that Whole Foods is
getting cheaper.

Private-label products. Eighty percent of
Trader Joe's products
are in-house, meaning that customers can't get them anywhere
else and the grocer can sell them at lower prices. The creativity
of the in-house products is also important. Some of the most
popular products include Chili-Lime Chicken Burgers, Cookie
Butter (a cookie-flavored nut butter), and corn and chili
salsa.

While Whole Foods has private-label products, they tend to veer
more toward basic. The company also sells a wider variety of
organic and healthy brands. As Wal-Mart and other grocers begin
to stock these products, consumers have less of an incentive to
go to Whole Foods.

Trader Joe's knows its audience. Trader Joe's is
focused on product innovation and selling groceries and wine at a
cheap price. Because customers know they can get high-quality
stuff at a low price, they pack Trader Joe's stores.

Whole Foods has had a harder time differentiating. The company's
response to all the competition isn't encouraging, according to a
recent Bloomberg Industries report.

"New initiatives at the
retailer, including online ordering and broadening the produce
assortment to include more non-organic items, may push Whole
Foods from unique to mainstream as it seeks a broader customer
base to defend against direct competitors such as Sprouts grocers
such as Kroger," according to Bloomberg.

In order to stand out, Whole
Foods needs to differentiate its products.